Rabat – Algeria is seeing its oil exports fall despite new highs in international oil prices amid increasing demand as the global economy recovers. Algeria’s economic independence has long been based on its large reserves of natural gas and oil.
That guarantor of state revenue is starting to evaporate, not from excessive extraction but instead from continuing domestic instability and crises that have become the norm for Algeria in recent years.
Algerians are again facing an empty presidential palace, which is bringing up uncomfortable comparisons with the state of the country in the waning years of the regime of former President Bouteflika.
Citizens are again asked to have faith in a nearly all-powerful president that they only see in photographs and on posters.
President Abdelmadjid Tebboune was already seen as an extension of the military, a perception only worsened by his slow recovery in Germany while Algeria’s recovery appears to stand frozen in time until his return.
Falling oil exports
Algeria’s reliance on its oil industry is easy to see. While the country is a member of the Organization of the Petroleum Exporting Countries (OPEC), it is not a member of the World Trade Organization (WTO).
In an effort to remain independent from international dictates on trade and economic liberalization, Algeria has understandably feared international financial institutes such as the World Bank and the IMF.
Yet, now that the country is caught in the middle of concurrent crises, it can no longer depend on its oil revenues to appease domestic and international critics, with few alternative economic options available.
As long as the black gold flowed Algeria was able to provide economic support to its people, reaching the status of middle-income country on the back of its most valued resource.
But in 2020, an unprecedented oil crash followed an equally devastating COVID-19-induced global economic crisis. OPEC committed to oil production caps, something many members surpassed as they desperately tried to fill-in budget gaps. Yet in Algeria, the national petroleum industry mostly failed to even hit the production cap amid domestic instability and crisis.
Crippled economy
Currently oil prices are experiencing new highs, with natural gas experiencing a bump in January. Still, Algeria was unable to profit from these recoveries as the country simply had not produced enough surplus to sell-off as prices reached new highs.
Years of declining oil production has resulted in consistently decreasing foreign exchange reserves. Algeria depends on oil and gas sales for its dollars. The over-reliance seemed reasonable enough decades ago, yet now it threatens the country’s well-being in ever more visible ways.
When revolutionary zeal spread throughout the Arab world one decade ago, Algeria’s ruling elite made available billions in social support and subsidies which effectively stifled dissent. But with little left in its piggy-bank to dole out to disaffected citizens, Algeria is currently experiencing crises that rival or surpass 2011-levels of discontent..
With its president stuck in Germany for COVID-19 treatment, Algeria now faces several intertwined crises without the ability to use its oil revenues to ease the pain. That pain continues to be felt daily by ordinary Algerians who are simply looking for stability and more or better economic opportunities.
Reinventing itself
Facing COVID-19, an economic and leadership crisis and now the emergence of the H5N8 bird flu in the heart of the country, Algeria is in the midst of an uphill battle to reinvent itself economically.
In the midst of this ever increasing pile of crises, the country will likely have to reconsider WTO membership. It may even have to approach the World Bank and the IMF for loans, something that entails making peace with the fact that they will demand deep economic reforms that are likely to create even more unrest.
While the country’s situation is dire, the response of the Algerian elite does little to inspire confidence.
Instead of marshalling the public in an effort to diversify and broaden the country’s economic output, the government is pointing fingers at foreign boogeymen to inspire the public into channeling its anger at often unnamed, fabricated foreign threats.
Cherif Belmihoub, the country’s “Minister of Foresight” presented his economic recovery plan in January and had to admit that “Algeria is no longer an oil country.”
Algeria, he advised, needs to abandon “bureaucratic defects” and the “squandering of state funds.”
Belmihoub stated that Algeria urgently needs deep and structural reforms. “We must get out of the face-to-face investor-public bank, and create a financial market and other financing mechanisms,” he said.
That a minister could be this sincere and direct in highlighting to Algerians the tough road ahead for their country appears to be the best indication that the government is running out of options as more intertwined crises loom.
But whether the country’s political and financial elite will heed Belmihoub’s calls for much-needed reforms to get out of decades of “bureaucratic defects” is a different matter altogether.
